Perry acts to support US nuclear

02 October 2017

US energy secretary Rick Perry has called on the Federal Energy Regulatory Commission (FERC) to act swiftly to address threats to grid resiliency through market reforms to recognise the attributes of baseload generation sources including nuclear. Perry also announced further support of up to $3.7 billion in loan guarantees to the owners of the Vogtle nuclear construction project in Georgia.

In a formal submission to FERC dated 28 September, Perry said the resiliency of the US energy grid depends on an "all of the above" mix of generation resources including "traditional baseload generation with on-site fuel storage" to withstand major fuel supply disruptions caused by natural and man-made disasters. The premature retirement of such resources is threatening that resiliency, he said.

Distorted price signals in FERC-approved organised electricity markets have resulted in under-valuation of the reliability and resiliency benefits provided by baseload resources such as coal and nuclear. It was time for the FERC to issue rules to "protect the American people from the threat of energy outages that could result from the loss of traditional baseload capacity", he added.

Market changes have resulted in a significant loss of traditional baseload generation, Perry said. Citing the Department of Energy's (DOE) January 2017 Quadrennial Energy Review and its recently published Staff Report to the Secretary on Electricity Markets and Reliability, he said coal and natural gas steam turbine plants had dominated actual and planned power plant retirements, followed by nuclear. He said the USA had lost 4666 MWe of nuclear capacity between 2002 and 2016. A further eight reactors, representing 7167 MWe, had announced retirement plans since 2016, not including reactors where early closure has been averted through state-level action.

Traditional baseload generation, with on-site fuel supplies and the ability to provide voltage support, frequency services, operating reserves and reactive power, is essential to provide resiliency during events like the Polar Vortex of 2014, and more recently hurricanes Harvey, Irma and Maria, Perry said.

The FERC has already recognised the changing energy mix and that existing capacity markets are not providing a sufficiently reliable supply of electricity, Perry said. "Nevertheless, the fundamental challenge of maintaining a resilient electric grid has not been sufficiently addressed by the Commission or Commission-approved ISOs (independent systems operators) and RTOs (regional transmission organisations)," he said.

He noted that the commission's lack of a quorum earlier this year - which prevented FERC voting on regulatory matters from February to August - had "undoubtedly thwarted" the issuance of rules.

"But the continued loss of baseload generation with on-site fuel supplies, such as coal and nuclear, must be stopped," he said.

Failure of the commission to act expeditiously to develop new market rules to ensure recognition of the reliability and resiliency of such generation "would be unjust, unreasonable and contrary to the public interest", he said.

Perry's proposed rule would allow for the recovery of costs of "fuel-secure generation units that make our grid reliable and resilient". To be eligible, units must be located within FERC-approved organised markets; be able to provide "essential energy and ancillary reliability services"; and have a 90-day fuel supply on site. They must also be compliant with all applicable environmental regulations.

"It is the policy of this Administration to support an 'all of the above' approach to energy development and use. We need to properly recognise the value of each resource, being mindful of its role in our national defence, economic security, and the pursuit of environmental outcomes. In particular, we must account for the value of on-site fuel storage capability. Moreover, because of the long lead-time to secure and maintain these resources, we must also ensure that the technical expertise and materials are readily available," Perry said.

Perry has instructed the FERC to "consider and complete final action" on his proposed rule within 60 days from its publication in the Federal Register.

Climate win

Michael Shellenberger, president of the Environmental Progress research and policy organisation, said the rule could be a "huge win" for the climate, favouring nuclear plants over coal and gas because of its lower running costs and ability to store fuel onsite.

"Nuclear fuel is over one million times more 'energy dense' than coal, and so it's easy for nuclear plants to keep several years' worth of fuel on-site. By contrast, most coal plants keep just one month's worth of coal on site, because of the high cost of storing so much energy-dilute fuel," the organisation said.

Maria Korsnick, president and CEO of the US Nuclear Energy Institute, said Perry's action addressed the failure of markets based on short-term prices to value electricity system benefits. It also addressed the problem of electricity being "taken for granted" by policymakers. "[It] only gets noticed if the electricity fails to flow," she said.

Exelon Corporation, owner of some of those nuclear plants that are threatened with premature closure, welcomed Perry's directive. "While we are still reviewing the proposed rulemaking, Exelon is pleased that the DOE is proposing action to ensure that attributes of nuclear generation are fully and appropriately valued so that our customers can continue to enjoy the resiliency, security and environmental benefits that they bring to the communities we serve," the company said.

Vogtle support

Separately, Perry announced on 29 September conditional commitments for up to $3.7 billion in loan guarantees to the owners of the Vogtle project: $1.67 billion to Georgia Power, $1.6 billion to Oglethorpe Power Corporation, and $415 million to three subsidiaries of Municipal Electric Authority of Georgia (MEAG Power). The DOE has already guaranteed $8.3 billion in loans to support construction of Vogtle Units 3 and 4.

"I believe the future of nuclear energy in the United States is bright and look forward to expanding American leadership in innovative nuclear technologies," Perry said. "Advanced nuclear energy projects like Vogtle are the kind of important energy infrastructure projects that support a reliable and resilient grid, promote economic growth, and strengthen our energy and national security."

Paul Bowers, Georgia Power chairman, president and CEO, thanked the DOE for its support and commitment to the project, of which the company owns 45.7%.

"Today's announcement reflects the wide-ranging governmental support for nuclear energy in America," he said.

Following constructor Westinghouse's Chapter 11 bankruptcy filing earlier this year, Vogtle's co-owners in August filed a recommendation with the Georgia Public Service Commission to complete construction of the two AP1000 units as the most economic choice for customers. The company expects unit 3 to begin commercial operation in November 2021 and unit 4 in November 2022.